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Types of
budgets... Page 2
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Taking it to the
21st Century
What are the characteristics of the budget for the future? It should be designed to let
you divide and reserve your funds, and remain in control of them, without a lot of extra
work. It should allow easy transfer of funds among budgeted items so you won't starve if
you happen to run out of grocery money. And it should provide a single reconciliation
point so that all family members can use a single budget plan.
The Concept of an Overlay
An overlay allows you to see the way your funds are divided up and reserved for special
purposes -- it imparts organization to your finances without changing them or the way you
handle them.
To illustrate this idea, suppose you were given an aerial photograph of a town that you
had never visited, and asked to pick out a few locations of interest: the park at the
corner of Elm and Main, or the bank at High and Third. Pretty tough assignment, right?
Now, suppose you were handed an overlay printed on celluloid—that clear plastic
material used for overhead projector transparencies and animation drawings. A map of the
city, with all the streets clearly marked, would be printed on the celluloid. Placing the
map on top of the photograph, you could pick out that park and bank with ease! Notice that
the photograph itself would not change at all, but your understanding of it would be
significantly enhanced with the use of the overlay.
Working Hand-in-hand with your Checking Account
The budget of the future works hand-in-hand with your checking account to provide an
overlay of your checking account balance. Normally, when you look at the final line of
your checkbook balance, you don't have much of a clue as to what that money is for. How
much of it can you spend on groceries? How much do you need to reserve for all your
utility bills? The overlay system will give you those details. You will always know the
disposition of every penny, all without changing your checkbook, the way you pay bills, or
the way you write checks.
Focusing Attention Where Needed
Another idea central to the future of budgeting is that it allows you to focus your
attention where it is needed. The daily, routine assaults on your checkbook as you pay
monthly bills and take care of mundane expenses can get in the way of truly managing your
money and concentrating on financial strategies.
A good analogy here might be to put you in sole charge of a daycare center responsible for
20 active four-year-olds. To add complication, suppose that one child had a special need
that day-perhaps she had suddenly become ill and required lots of special attention.
Stranded by yourself, this situation would be very difficult to deal with. But what if you
could enlist some helpers? Suppose you could call in additional workers to watch the other
children while you administered the special care. You could devote your attention where it
was needed.
Handling the Routine Aspects of your Finances
The budget of the future can be your helper to handle all the routine aspects of your
income and payments, allowing you to concentrate on the important things: investments,
savings, financial growth, important purchases, or whatever your priorities are.
A Budget is
a Tool, not a Dictator
This means that a budget is something you should use to control your finances. It is not
something that should control you!
Jane Chidester is the author of "  BudgetYes! 21st Century Solutions for Taking Control of Your Money
Now!" She also conducts seminars and is a published columnist on personal
budgeting topics. Her website, Budget Central, is a repository of information
and resources on personal budgeting, financial planning, and household money management -
a complete budgeting education. You can contact her at Jane@TulipTreePress.com.
Credit and Debt Calculators:
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• Should I pay off debt or
invest in savings?
• What will it take to pay off my balance?
• Should I consolidate my
debts?
• How Much Am I Spending? |
